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ECONOMIC ISSUES ASSOCIATED WITH FOOD SAFETY
Stephen R. Crutchfield
USDA Economic Research Service
Introduction
American agriculture excels at producing an abundant supply of safe,
nourishing food for the nation and the world. Despite the productivity and
quality of the nation's food system, concerns remain about the safety and
quality of the food we eat and the water we drink. In recent years, some wellpublicized incidents, such as the contamination of hamburgers with the E.
coli 01 57:H7 bacteria and residues of the pesticide Alar on apples, have led
to increased public concern about the possibility of foodborne illness and
exposure to potentially hazardous chemicals in the food supply. According
to the USDA's 1991 Diet and Health Knowledge Survey, 43 percent of
primary meal preparers cited bacteria or parasites in food as the food safety
issue of greatest concern to them. An additional 22 percent cited pesticide
residues in food as their greatest safety concern. In response, the Agriculture
Department has begun several broad-based efforts to make further improvements in the safety and quality of the nation's food supply.
This paper discusses the food safety issue from the economist's perspective.
Economics has an important role to play in the public debate about food safety.
Fundamental economic principles help explain why a food safety problem may
exist. Economic analysis of the costs of foodborne disease helps put the overall
social burden of unsafe food into a broader perspective. Finally, economic
analysis of the costs and benefits of alternative policies to improve food safety
supports public and private decision making by allowing us to rank policy
options on the basis of their expected costs and benefits.
The next section gives a brief overview of some of the main food safety
concerns in the U. S. This is followed by a section on the details of some of
the implications of foodborne pathogens in meat and poultry, and a section
on estimates of the costs of foodborne disease related to meat and poultry.
Finally, the role of economics in evaluating public policy options is
discussed, with an illustrative example of how our estimates of foodborne
disease costs can be used to measure the benefits of pathogen reduction.
Overview: The Economics of Food Safety
The food supply in the U.S. is generally considered healthy and safe.
However, even the modern industrial food system may result in undesired
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or unanticipated outcomes which may pose a health hazard for consumers.
Bacteria and parasites may remain in fresh or processed meat and poultry
products, which can cause human illness if the food is improperly prepared
or handled. Residues of agricultural chemicals may remain on fruits and
vegetables, and prolonged dietary exposure to such chemicals may pose a
risk of cancer or other adverse health effects. Finally, chemical residues
from fertilizers and pesticides applied to cropland may end up in drinking
water supplies, again exposing consumers to a risk of dietary exposure to
potentially hazardous chemicals.
Consumers make choices about the food products they purchase based
on a number of factors. In addition to the price of the product, such factors
as appearance, convenience, texture, smell and perceived quality all influence the choices made in the marketplace. In an ideal world, consumers
make consumption decisions with full information about product attributes,
and so choose the selection of food products which maximizes their wellbeing.
In the real world, however, there are numerous information problems
which complicate the consumer's decision as far as food safety is concerned. All raw meat and poultry products contain some level of microorganisms, some of which may be pathogens. Therefore, handling and
processing of meat and poultry unavoidably incurs some probability of
fostering the growth of these pathogens, which may remain in food products
at such a level as to pose a risk of illness to consumers. However, consumers
generally are unable to determine the level of risk offoodborne illness posed
by their consumption choices, since pathogens are not visible to the naked
eye. Aside from some rather obvious indications (unpleasant odor or
discoloration, which may be caused by non-pathogenic spoilage microorganisms), there are, in many cases, no clear-cut ways for consumers to
determine that the food they buy may provide a health risk from pathogens
or other causes (such as pesticide residues).
Just as consumers do not have full information about the safety of the
products they buy, producers have no direct incentive to provide this
information. Since it is not clear to firms whether consumers can distinguish
among food products of different safety levels, they may not wish to incur
the extra cost of providing more than the minimum allowable level of safety
in the food products they market. In addition, there may be some concern
from a consumer protection standpoint about firms making unsubstantiated
health-risk claims in labeling or advertising.
This lack of information on the part of consumers about food safety, and
the lack of incentives for firms to provide such information, leads to a case
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of market failure. The workings of a non-regulated market may yield a suboptimal level of pathogens in the food supply, excessive levels of human
health risk, and higher levels of illness and mortality related to foodborne
pathogens and pesticide residues. In such a case, the public welfare may be
enhanced if society chooses to regulate the food processing industry to
reduce the level of foodborne pathogens and increase the knowledge of
consumers, so they may take personal action to reduce their risk of exposure
to foodborne illness.
The economic issue of concern is how best to achieve the goal of a safer
food supply. Although regulations governing the production, processing,
distribution and marketing of food products may increase the safety level
of the nation's food supply and provide benefits of reduced risk and illness,
such regulations may also increase costs to producers, and potentially raise
the costs of food to all consumers. The task is to ensure that the regulations
maximize the net benefits of increasing food safety, while minimizing the
costs these regulations impose on producers and consumers.
The next two sections show how some of the economic costs of food
safety can be determined. We first present a baseline estimate of the extent
of foodborne illness related to microbial pathogens. We then present some
of the costs associated with these illnesses.
The Extent of Pathogen-Related Foodborne Disease
Bacteria and parasites exist, to some degree, in all farm animals. Most
microbes which are pathogenic to animals do not cause human illness.
However, some pathogens which remain in meat and poultry products after
slaughter may cause human illness under certain conditions. Pathogens may
also be introduced to meat and poultry products in slaughter plants, in
processing plants, in grocery stores or food service establishments, and at
home (see fig. 1). Examples of where pathogens can enter the food chain are
through feed, manure management, processing procedures, or equipment
and facility sanitation. Improper operating procedures at the processing
level, and food handling practices in the home or restaurant, may cause
pathogens to survive and grow, which in turn increases the risk offoodborne
illness. Among the most frequent problems are inadequate cooking, inadequate cooling and improper personal hygiene.
The Centers for Disease Control and Prevention (CDCP) and the Food
and Drug Administration (FDA) estimate that, each year, between six and
33 million people become ill from microbial pathogens in their food. Of
these, an estimated 6,000 to 9,000 die (CAST, 1994). These figures are
estimates based on reported outbreaks and other epidemiological data, and
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are subject to some uncertainty. First, many foodborne illnesses have
symptoms which are similar to other gastro-enteric illnesses, and may not
be reported by physicians as foodborne. Second, in some cases, there is a
delay of days or weeks between exposure to a foodborne pathogen and the
resultant illness; many illnesses that are reported may not be linked to
specific foods or pathogens.
Table 1 presents illness and death estimates for seven pathogens for
which we have the most reliable information: These include Salmonella,
Campylobacterjejuni/coli,Staphylococcus aureus, E. coli 0 157: H7, Clostridiumperfingens, Listeria monocytogenes. and Toxoplasma gondii. Illness caused by Salmonella is frequently associated with chicken and egg
consumption. Symptoms generally occur six to 48 hours after eating
contaminated food, and can last from days to weeks. Acute symptoms
include abdominal pain, nausea, stomach ache, vomiting, cold chills, fever,
exhaustion and bloody stools. Endocarditis (infection of the heart), meningitis (infection of the brain tissues), and pneumonia may follow the acute
stage. The pathogen can also cause chronic consequences such as rheumatoid symptoms, reactive arthritis and Reiters' syndrome. Death may result
from the illness. A new strain, Salmonellaenteritidis, can be passed to eggs
before the shell forms, if the hen is infected. Fresh shell eggs and their
products can be contaminated with Salmonella enteritidis. Homemade
foods containing fresh eggs, such as ice cream, egg nog, mayonnaise, and
Caesar salad, are potentially risky. A recent outbreak of Salmonella
enteritidis-relatedillness in the Midwest was traced to ice cream which was
transported in containers that previously carried unpasteurized eggs.
Illness caused by Campylobacter has been linked to chicken consumption. Symptoms usually begin in one to seven days after exposure to
contaminated food, and can last for days. These symptoms include malaise,
diarrhea, abdominal pain, bleeding and fever. Other complications may
follow, such as meningitis, arthritis, cholecystitis, urinary tract infection,
appendicitis, septicemia, Reiters' syndrome, and Guillain-Barre syndrome
(GBS)- a major cause of non-trauma related paralysis in the United States.
A small proportion of patients die.
Illnesses caused by E. coli 0157:H7 are less widespread, but have
received considerable publicity following recent outbreaks in the Pacific
Northwest attributed to undercooked hamburgers in a fast-food restaurant
chain. The pathogen is also found in raw milk, unpasteurized apple cider,
processed sausage, and home-prepared hamburgers. The latter present a
particular risk; the bacteria lives on the surface of meat products and is
normally destroyed by cooking. However, when meat is ground to make
hamburger or sausage, the organism is distributed throughout the product.
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-
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TABLE 1
Cases of Foodborne Illness for Selected Pathogens - 1993
(Estimated)
Bacteria
Salmonella
Campylobacter jejuni/coli
Staphylococcus aureus
E. col 0157:H7
Clostridium perfingens
Listeria monocytogenes
696,000-3,840,000
1,375,000-1,750,000
1,513,000
8,000-16,000
10,000
1,526-1,767
696-3,840
110-511
1,210
160-400
100
378-485
2,056
41
3,605,582-7,132,823
2,695-6,587
Toxoparasitema gond
Toxoplasma gondii
Total
Source: Buzby and Roberts, 1995
___
TABLE 2
Populations Susceptible to Foodborne Illness
Elderly
Pregnant women
Neonates
Cancer patients
Nursing home residents
Organ transplant patients
AIDS patients
29,400,000
5,657,900
4,002,000
2,411,000
1,553,000
110,370
135,000
Source: US Dept. of Health and Human Services, 1993
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If the sausage or hamburger is undercooked or eaten rare, the bacteria in the
center of the meat may not be killed. It takes three to seven days before
symptoms occur after eating contaminated foods. Acute symptoms, lasting
six to eight days, are diarrhea, abdominal pain, vomiting and neurologic
complications. Chronic consequences include hemolytic uremic syndrome
(HUS), which is characterized by kidney failure and strikes mostly children
under the age of five. Some proportion of patients will die.
Not all segments of the population are equally at risk from microbial
foodborne disease. Much of this risk comes through impairment of the
immune system; organisms which a healthy immune system may successfully combat may pose a greater risk to some population subgroups than
others. These include the elderly, pregnant women, children under the age
of one, nursing home patients, and people with compromised immune
systems, such as cancer patients, organ transplant patients, and people with
Human Immunodeficiency Virus or Acquired Immune Deficiency Syndrome (HIV/AIDS) (Table 2).
Elderly individuals undergo a decrease in immune function as they age.
The immune system of neonates and young children is not fully developed.
Pregnancy puts a woman and her fetus at special risk of foodborne illness
caused by pathogens such as Listeria monocytogenes and Toxoplasma
gondii; miscarriage, stillbirth or fetal abnormality may occur. Since, by
definition, the immune systems of people with Acquired Immune Deficiency Syndrome or who have been infected by the Human Immunodeficiency Virus are damaged or destroyed, these patients are also at greater
risk of foodborne disease.
Foodborne illness trends, over time, are not consistent across pathogens.
Some illnesses may be decreasing over time. Others may be increasing.
However, it seems clear that, as the population ages and the number of AIDS/
HIV cases grows, the pool of people susceptible to microbial foodborne illness
seems certain to increase. Other factors may cause an increase in overall risk
as well. One factor, which is critical to preventing foodborne illness, is
correct handling of food, and cooking to appropriate temperatures. The
USDA, in 1994, required all fresh meat and poultry products to carry
warning labels alerting consumers to foodborne health risks, and advising
safe handling and proper cooking precautions. Consumers may not be able
to take precautions to prevent foodborne illness, however, when food is
consumed in restaurants or institutional settings. According to USDA food
consumption and expenditure data, between 1970 and 1993, the proportion
of food consumed away from home rose from 34 percent of total food
expenditures to 41 percent. As more and more food is consumed away from
home, consumers will have less control over the safety of their food intake.
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Economic Costs of Foodborne Disease
When these people we've just described become ill or die, then society
pays a cost for that illness. These costs include those of treating the illness,
either outpatient or in a hospital, the costs of long-term care or rehabilitation, and the wages lost when workers are unable to perform theirjobs. ERS
has examined the costs of illnesses associated with seven pathogens in food.
We started with the estimated numbers of illnesses just presented, and
examined the nature and severity of the illness. Then, we calculated the
medical costs, based on the typical treatment needed for each type of illness.
When the illness implied long-term disability or long-term care, we also
included the cost of that long-term care, as well as the lost wages the
disabled worker could have earned and reduced wages due to lower
productivity. Our estimates also took into account the age at time of illness.
Table 3 shows how some of the medical costs add up. For each pathogen we
studied, we include both the short-term medical costs, and the long-term costs.
These two add up to between $4 billion and $8 billion in medical costs each year
for these seven pathogens. We include a "high" and a "low" estimate, since
some of our cost or illness numbers were only available as estimated ranges.
These estimates include both the inpatient costs, outpatient costs and upfront doctor's charges for foodborne illness. They also include estimates of
the lost productivity associated with those made ill or who die prematurely
from foodborne diseases. We took a conservative approach to the issue of
placing a dollar value on lost lives, using published estimates of lost wages
(and implicit value of homemaking) when a person dies prematurely (see
Landefeld and Seskin). Essentially, a death from foodborne illness is given
a value equal to the present discounted value of lost wages of an average
worker at time of death, or value of housework, which yields values of $694
million to $1.4 billion for the lost productivity due to illness and deaths
associated from the pathogens in question.
It should also be noted that this total medical cost estimate of $4 to $8
billion is quite probably an understatement of the true cost. For one thing,
many foodborne illnesses go unreported, and the medical costs are based on
a 'best guess' at the total number of illnesses. The actual cases of illness may
be higher (or lower) than this 'best guess.' Second, these costs are only costs
associated with actual illness. Those not made ill, however, may place a
value on reduction of risk as well. This willingness to pay for safer food is
not reflected in these cost estimates either.
In principle, non-market valuation techniques, such as contingent valuation, could be used to enhance our cost estimates by measuring the value
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to consumers of safer food, even when they are not made ill. The contingent
valuation method involves what Smith calls "structured conversations,"
where interviewees are provided information about a particular issue, such
as safer food, and then are asked to indicate their willingness to pay for one
or more alternatives, compared to some status quo. This valuation technique
has been used to place values on a variety of non-market goods and services,
and has been given qualified endorsement for valuing natural resource
damages, such as oil spills. ERS has conducted research using the contingent valuation method to identify consumers' willingness to pay for
drinking water free of nitrate contamination, for example. Research is
underway at ERS to extend this valuation technique to valuing decreases in
the risk of foodborne illness.
Benefits of Safer Food
The role of economic analysis in addressing food safety issues goes
beyond calculating the costs of foodborne disease. The cost estimates
presented above may also be used to evaluate the cost-effectiveness of
public policies designed to alter the status quo and decrease microbial
contamination of the food supply.
As an illustration, consider the recent proposals put forth by the USDA
to revamp the meat and poultry inspection system. The department is
proposing to replace the current 'carcass by carcass' inspection system with
one that identifies food safety risks throughout the production process, and
creates interventions to prevent contamination. The current system, which
relies on sight, touch and smell to identify unsafe food, does not detect the
presence of microbial pathogens. The new approach, called Hazard Analysis and Critical Control Point (HACCP), uses a science-based approach to
identify points in the production process where pathogens may be controlled ('hazard analysis'), and then determines the best approach at that
'critical control point' to eliminate microbial contamination. (The Food
Safety and Inspection Service of the USDA has proposed the HACCP
regulations for meat and poultry inspection. The FDA has proposed similar
regulations for seafood inspection.)
A detailed study of the proposed HACCP regulations was recently
published in the FederalRegister. The Food Safety and Inspection Service
(the agency responsible for meat/poultry inspection) used as a baseline
current estimates offoodborne illness presented above. It was assumed that,
when fully implemented over a five-year period, the HACCP rules would
lead to a 90 percent reduction in pathogen levels across the board. Using this
assumption, our analysts at ERS made a further assumption that a 90 percent
reduction in pathogen levels would result in an equivalent decrease in
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TABLE 3
Medical and Productivity Costs for Selected Foodborne Pathogens - 1993
(Estimated)
Pt. Meat/Poultry
%
50-70
75
75
50
50
50
Meat/Poultry
$ billion (1993)
0.3 -2.6
0.5 - 0.8
0.2 - 0.5
0.1 - 0.2
0.6
0.1
2.7
100
2.7
5.6-9.4
n/a
4.5 - 7.5
All Foods
Bacteria
$ billion (1993)
Salmonella
0.6 -3.5
Campylobacterjejuni/coli
0.6- 1.0
E. coli 0157:H7
0.2 -0.6
Listeria monocytogenes
0.2 -0.3
Staphylococcus aureus
1.2
Clostridium perfingens
0.1
Parasite
Toxoplasma gondii
Total
Source: USDA Economic Research Service, 1995
TABLE 4
Benefit/Cost Assessment of Proposed HACCP Rules for Meat and Poultry Inspection
($1,000)
Costs
Near Term:
Micro testing
$131.9
Sanitation SOP
88.6
Time/temperature requirements 45.5
Antimicrobial treatments
49.7
Subtotal
$315.7
HACCP Implementation:
Plan development
Micro testing
Recordkeeping
HACCP training
Aseptic training
Fed. TQC overtime
Agency training
SOP under HACCP
$37.2
1,262.5
456.4
24.2
1.9
20.9
0.4
181.2
Total
$1,983.2
Total Costs
$2,298.9
Benefits
Foodborne Illness avoided:
Campylobacterjejuni/coli
Low
High
$2,191 $4,670
E. coli 0157:H7
1,168
Lysteria monocytogenese
Salmonella
854 1,168
1,751 15,178
2,419
Source: Federal Register, Vol. 60, No. 23, February 3, 1995,
Pg. 6872.
Benefits and costs represent present value over 20 years,
discounted at OMB suggested rate of 7%. Cost data from
USDA Food Safety and Inspection Service. Benefits data are
based on figures inTable 3,assuming that HACCP results in
a 90% decrease incosts of illness. Benefits were assumed to
begin infive years after the adoption of the final HACCP rule.
Low
Total Benefits
146
High
$6,422 $23,935
foodborne diseases and costs of illness associated with four of the seven
pathogens described above. When spread over 20 years and converted to
present values using a seven percent discount rate, the total annualized
benefits are between $6.4 and $23.9 billion dollars (see Table 4).
Of course, these benefits must be compared to the costs of achieving this
pathogen reduction. USDA's Food Safety and Inspection Service has
estimated the annualized costs of the proposed rule at $1.9 billion over the
same 20-year time horizon. Clearly, then, the proposed rule passes a 'costbenefit analysis' test, in that the benefits of the rule (reduced costs of illness)
exceed the costs. This analysis is not complete, of course. A more extensive
analysis would compare alternatives to the HACCP rules, and rank these
alternatives on the basis of their cost-effectiveness. In addition, there are
distributive consequences which may be of interest to public policy officials: there is come concern that the HACCP rules, for example, may affect
small processing operations more than large firms.
Conclusions
This paper has given an overview of some of the economic issues
associated with food safety. It has been necessarily brief, outlining the
economic reasons for food safety problems, and has only dealt in detail with
one specific issue, microbial pathogens in meat and poultry.
Much more work needs to be done in this area. First, our estimates of the
incidence of foodborne illness are incomplete; for reasons given above,
there is much uncertainty about the incidence and prevalence of illnesses
related to microbial pathogens. Second, we need more comprehensive and
detailed estimates of the benefits of safer food. Finally, more work needs to
be done on the economic consequences to producers and consumers of
alternative food safety regulations and policy options.
We expect that economics will continue to play a role in public policy
decisions in the future. Recent executive branch policies have required
accounting for costs and benefits in all regulatory decisions. Recent moves
in the Congress to require that all regulations undergo risk assessment and
cost-benefit analysis also means that economics will play a larger role in
public policy making in this area. Given the uncertainty economists face in
measuring the "Ps" (costs of illness) and "Qs" (number of illnesses), doing
cost-benefit analysis of food safety programs will require creativity and
willingness to make simplifying assumptions. It will also mean that the
decision makers seeking information must have a clear understanding of the
inherent uncertainty in the information economists supply.
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REFERENCES
Buzby, Jean, and Tanya Roberts. "Foodborne Disease Costs in the United States."
Food Review. 1995, forthcoming.
Buzby, Jean, Tanya Roberts, et al. "Bacterial Foodborne Disease: Medical Costs
and Productivity Losses." USDA Economic Research Service Agricultural
Economics Report. 1995, forthcoming.
Center for Agricultural Science and Technology (CAST) "Foodbome Pathogens:
Risks and Consequences." Task Force Report, ISSN 01944088, No. 122,
Washington, D.C., September, 1994.
Landefeld, J. Steven, and Eugene V. Seskin. "The Economic Value of Life: Linking
Theory to Practice." American Journal of Public Health 6 (1972): 555-566.
Smith, V.K. "Nonmarket Valuation of Environmental Resources: An Interpretive Appraisal." Land Economics, Vol. 69, No. 1 (Feb., 1993): 1-26.
United States Department of Agriculture, Food Safety and Inspection Service, 9
CRF Part 308, et al. "Pathogen Reduction; Hazard Analysis and Critical Control
Point (HACCP) Systems; Proposed Rule." Federal Register, Vol. 60, No. 23.
Feb. 3, 1995.
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1995 Farm Bill Update